BVD Company uses a job order cost accounting system and last period incurred $80,000 of overhead and $100,000 of direct labor. BVD estimates that its overhead next period will be $75,000. It also expects to incur $100,000 of direct labor. If BVD bases applied overhead on direct labor cost, their overhead application rate for the next period should be:
A) 75%.
B) 80%.
C) 107%.
D) 125%.
E) 133%.

Question

Quizplus · Accepted Answer

The overhead application rate is calculated by dividing the estimated overhead by the estimated direct labor cost. So, $75,000 / $100,000 = 0.75 or 75%.

BVD Company Uses a Job Order Cost Accounting System and Last